Wednesday 15 May 2013 12.05 EDT
First published on Wednesday 15 May 2013 12.05 EDT

Unemployment jumped and average wage rises dropped to their lowest rate on record in the three months to March, underlining concerns at the slow pace of the UK's recovery.

There was an increase in unemployment of 15,000 in the first quarter of the year, while during the same period regular pay rose by just 0.8%.

Total pay rises, which include bonuses, came in even lower than average pay rises, said the Office for National Statistics, increasing by only 0.4% at a time when inflation remains stubbornly high at 2.8%.

The worsening unemployment picture sent the jobless rate up from 7.7% to 7.8% and left the total number unemployed at 2.52 million.

Chancellor George Osborne has come under increasing pressure to stimulate economic growth from a wide range of critics, though they differ in their remedies, especially in areas such as construction.

A report for the London Assembly this week found that there are 150,000 skilled construction workers in the capital claiming jobseeker's allowance, at a cost of £2.1bn in benefits. A similar picture of empty and half-built construction sites is repeated across the country as the industry, which accounts for 7% of economic activity, remains in the doldrums.

Martin Back, UK economist at Capital Economics, said the labour market data provides "something of a reality check" following recent positive news on the economy. "There was a triple whammy of bad news, with employment in the three months to March down by 43,000 and unemployment, on the ILO measure, up by 15,000. Meanwhile, the squeeze on real earnings has intensified, with average earnings including bonuses falling by 0.7% year on year in March, the first drop since 2009."

The employment minister, Mark Hoban, conceded there had been a "disappointing increase" in the headline rate of unemployment, but said other indicators showed the government was making progress. "There are record numbers of women in work, fewer young people unemployed and more vacancies available for those looking for work. We are also seeing continuing falls in the number of people claiming jobseeker's allowance, which is positive."

The number of job vacancies rose in the three months to March to 503,000, the highest total since 2008, though well down on the 950,000 jobs on offer in 2007.

The number of people claiming jobseeker's allowance in April fell to its lowest level since May 2011 at 1.52 million, down 7,300 from March 2013 and down 67,800 from a year earlier.

Analysts said some of the drop in the claimant count could be ascribed to the slight improvement in the economic picture this year and the success of benefit offices in shifting workers back into work.

Hoban said: "These statistics also show that the UK's employment rate, which currently stands at around 71%, compares favourably to the US, where it is 67%, and the EU and the eurozone, where it is even lower – at 64%."

Louise's story

Louise Thomasson never imagined she would still be doing her part-time student job six months after graduating with a first in English. Since last autumn, the 22-year-old from Bolton has applied for more than 100 jobs, but is still looking for that elusive break into graduate work in marketing.

"I've put a lot of effort getting a first because I though it would at least help my CV stand out a bit from all the other grads that are applying, but it doesn't seem to have made any difference."

Thomasson, who has £24,000 in debts, expects not to be as well off as friends who didn't go to university when she lands a job. The young graduate was given yet another reminder of how tough the labour market is when she went to an assessment day for an admin assistant job paying the minimum wage. "When I turned up, it looked like the boardroom of The Apprentice. There were people there who had done masters. There were people who had come from prestigious universities. One of them had set up their own charity. It was quite intimidating and I was sort of startled by the kind of calibre of the people who had turned up."

She didn't get through to the next round, and for now continues to work 20 hours a week in a sales job at an electrical equipment superstore and do two days a week volunteering. Although she finds her situation bleak, she is not giving up. "I did work very hard in my degree and I do have a passion for what I do."

Selling televisions would be a welcome break for Lisa Brownlie, who has not had a job since she left school without qualifications two years ago. "The jobs I have been applying for have been any job I can get hold off supermarkets, sales, anything." She has been called to interview only twice, failing both times because she lacks school certificates. "Me with no qualifications against 10 other people that have something, I've got no chance," she said.

Brownlie recently passed a maths NVQ and is close to finishing two courses in English and customer service at Rathbone, a Manchester-based charity that helps young people not in education, work or training. Although the charity gives her £40 a week to meet lunch and travel expenses and she lives rent free with a friend's parents, money is tight.

Once she has finished her exams, she hopes to study childcare. "I would like to focus on younger children because I think the first couple of years of a child's life are the most important."